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Iran Primer's Discussions

What is the status of Iran’s economy three months after President Hassan Rouhani’s inauguration?

In a televised interview marking his first 100 days, President Rouhani acknowledged that the state coffers were virtually empty when he assumed the presidency. The government did not have sufficient revenue to pay public sector salaries. Iran also faced major shortages in basic commodities, such as wheat, at the same time. To compensate for the unexpected shortfall, the new government had to stop several development projects and borrow from the Central Bank.

In the November 26 televised interview, Rouhani also outlined the latest economic indicators:

• Inflation was over 40 percent in the last Persian year, which ran from March 2012 to March 2013.

• Iran’s GDP declined by 5.8 percent over the same period, according to the Central Bank.

• Unemployment was above 12 percent, with youth unemployment at over double the rate. (Unemployment does not include discouraged workers, who mask problems of under-employment and part-time work.)

Rouhani said Iran had not suffered this depth of stagflation since the revolution’s early years.

The government is also in debt to a wide variety of public and private entities:

• Iran’s Central Bank, Social Security and Retirement funds

• Municipal governments

• Provincial development contractors

• Energy and industrial producers

• Educational institutions

Rouhani put the current debt at 200 trillion tomans, or roughly $70 billion using the open market exchange rate. If true, the ratio of government debt to GDP is about 30 percent, a sizable jump from previous years even with the currency’s devaluation. In comparison, Turkey’s ratio of public debt to GDP is about 36 percent, and Egypt’s ratio is over 80 percent.

What role does Iran’s economy have in Rouhani’s political game plan?

Rouhani’s foreign and domestic economic strategies are irrevocably linked. Inside Iran, the issue is not whether international sanctions or domestic mismanagement caused its economic woes, which is largely a rhetorical question used by Iran’s politicians to criticize each other. So the barriers to economic rejuvenation are mostly political.

Iran’s economic woes will be easier to solve if it can increase access to:

• Foreign exchange

• Global financial flows

• Oil revenues

Rouhani’s team is trying to mobilize allies in parliament behind a range of new economic policies to address these issues. Given perceptions of President Mahmoud Ahmadinejad’s disastrous legacy, hardliners have little leverage – for now – to challenge the new centrist president and his reformist allies on economic policy. If reforms deliver results, conservatives can say they were part of the solution. If not, Rouhani’s initiative lessens the chance of Iran’s entire right-wing establishment attacking him – as happened during former President Mohammad Khatami’s tenure.

What strategy is Rouhani pursuing to improve Iran’s economy?

Rouhani is engaged in a precarious balancing act. So far, his administration has decided not to massively curtail government spending on cash grants, energy subsidies, and other public arenas. Given the importance of government spending in the economy through various formal and informal networks, a rapid move toward austerity to reduce inflation would drive the economy into a deeper recession. Rouhani is cutting back the budget both this year and next year, but his team has argued they can spend limited revenues in smarter ways.

Rouhani concedes that the government cannot cut enough spending to balance the budget, since Iran’s lower and middle classes rely on subsidized healthcare and income grants. The administration fears social backlash. So, for now, Rouhani is trying to establish social trust in public institutions in a way that will allow more reforms down the road.

At the same time, Rouhani has promised to accomplish two goals over the next two years:

• Reduce inflation to 25 percent

• End the recession.

His ambitious agenda will require more stringent monitoring of public spending and directing it in more productive ways, while also creating an investment climate that encourages productive, not speculative, activities by a fickle private sector.

What shifts have occurred in the economy since Rouhani’s election—with what impact?

The new government has largely stopped using shares of public sector companies to pay existing debts to semi-governmental holding companies, pension funds, and contractors. A recent Reuters investigation on the Imam’s Orders Headquarters detailed how one such holding company – ostensibly run by the office of Supreme Leader Ayatollah Ali Khamenei – invested in wide swaths of Iran’s economy. The story grabbed headlines, but it was misleading.

This form of investment and asset management is common in Iran, not just for companies attached to the Revolutionary Guards or the Supreme Leader’s office. There are dozens of such holding companies, with ownership spread among political actors. Rouhani’s administration has made a decisive break from the Ahmadinejad era by halting government transfer of state assets into this form of ownership and rethinking how to privatize the public sector.

The government has also put a stop to the previous administration’s huge public housing program – the Mehr Housing Plan – which is widely regarded as a major driver of Iran’s inflation. The plan was supposed to construct public housing for poor Iranians, mostly newlyweds, so they could obtain low-interest loans and move out of parents’ homes. But the plan was botched.

Large apartment complexes were built on the distant edges of urban centers, often without access to other public facilities. Beneficiaries of the plan were predominantly Iran’s new middle classes, not the poor. And, partly as a result of subcontracting out the work with little oversight, construction was shoddy. The Iranian press is now filled with pictures of sub-par housing complexes and stories of people refusing to move in. The Rouhani government terminated the Mehr Plan and promised to revamp it into a “social housing” program – in several years.

What has happened to Iran’s subsidy reform plan and income grant program?

In his televised interview, Rouhani said the government is weighing its options. It could raise the price of energy, reduce the value of income grants, or determine some way to restrict recipients of income grants to lower-income households. But each option has its costs. Rouhani said the government could have looked at individual bank accounts to estimate household incomes, but in the end rejected this option. People must regain faith in the banking system, he said, so they would feel more comfortable about investing.

So, for now, Iran’s subsidy system is in a holding pattern. The government is not reducing subsidies this year on fuel or energy, nor is it changing the nominal level of grants to the population. In the meantime, several industrial sectors – from gas to auto to steel – are lobbying the government for financial support because of energy costs of production.

Overall, bolder economic policy shifts on any issue require an ever-wider political coalition. Rouhani has so far maintained a wide base of political support as his administration pursues engagement with Western powers on the nuclear issue. If he can keep this coalition intact, then he just may be able to walk the economic tightrope.

Kevan Harris is a sociologist and postdoctoral research associate at Princeton University.

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Iran’s entire socio-political landscape has changed since President Hassan Rouhani’s June election. There are a lot of hopes that things are going to get better, especially given what happened under the previous government. But this is a cautious hope or optimism, not the wild-eyed optimism of former President Mohammad Khatami’s era. Everything seemed possible in the late 1990s. Now hope is more balanced and realistic. Rouhani is a more pragmatic politician than Khatami, who was more of an intellectual and moral individual. Rouhani is more like former President Bill Clinton, someone who can deliver.

Iran's new president is also an insider. Rouhani knows how to navigate the corridors of power in Iran. He has known the supreme leader for some 40 years. And Rouhani has been his representative for 25 years on the Supreme National Security Council. So Rouhani also knows other power centers and how to maneuver them, which Khatami was reluctant to do. No one can question Rouhani’s professionalism, credibility or national security credentials.

Rouhani can formulate a strategy. The Scotland-educated cleric is a sophisticated politician who has the patience and knowledge required to achieve his objectives. Even conservatives, radicals and principlists cannot question his qualifications. His insider status is an asset rather than a liability.

Foreign Policy

On foreign policy, Rouhani’s appointment of Mohammad Javad Zarif (left) was an important signal to the world. There were a number of alternatives. So Zarif’s appointment signaled that Rouhani cares about international affairs, wants to improve Iran’s image, and resolve the nuclear dispute. As ambassador to the United Nations from 2002 to 2007, Zarif was a key figure in diplomacy and the nuclear issue. He was also important in terms of Iran’s image abroad, particularly in the West. Zarif speaks English fluently after receiving two degrees from San Francisco State University and a doctorate in international relations from the University of Denver. He has been Iran’s best diplomat since the revolution and virtually everyone acknowledges his credentials.

I’m optimistic that Iran can solve the dispute over its nuclear energy program. If an agreement is not reached, then the United States is probably creating barriers.

But on improving Iran-U.S. relations, I’m not very optimistic. Relations might improve but not to a great extent. In both Tehran and Washington, criticism of the other country is rewarded. A member of Iran’s parliament would pay a price for calling for better relations with the United States. And the same is true for a member of Congress. Look at previous resolutions from the House of Representatives. A total of 130 members said they wanted to give diplomacy with Iran a chance in a July 2013 letter to President Barack Obama. But once a new sanctions bill was put on the table, over 400 representatives voted for it — including more than 100 of those who signed the letter.

Lawmakers on both sides are afraid because it’s popular and easier to criticize the other country. So this structure should be changed. But how? It’s not an easy thing to do in either capital.

Nuclear Program

On the nuclear dispute, Iran and the United States want to get similar things out of a deal. Washington doesn’t want Tehran to have a bomb. And Tehran doesn’t want one either. But Iran has to give guarantees to the West that it doesn’t want a bomb. Verification systems will be a particularly important part of an agreement. An additional protocol should take care of this issue, and Iran would likely ratify that part of a deal. Tehran would also likely agree – in the end – to limit its uranium enrichment program and the size of its enriched uranium stockpile. Iran could also limit the number of centrifuges. But there are minimum requirements for Iran – such as retaining the right to enrichment and having centrifuges.

In return, Iran wants the removal of all sanctions imposed since 2008– unilateral and multilateral. Tehran also wants the E.U. incentive proposals to be put back on the table. They included investment in the oil industry, technology transfers, airplane parts and many other things. But that would most likely be part of the end game. An agreement could be implemented stage by stage, with the whole package initially agreed upon.

But Iranians are very suspicious of the end game. If they come to the negotiating table, agree and implement the first and second steps of a settlement, then the United States may tell Iran that it cannot enrich uranium.

Closing down the Fordo nuclear facility would not be an option for Iran. The government wants to retain the ability to enrich uranium. And Fordo is the one safe place for enrichment. Israel, Saudi Arabia, Pakistan and other nations cannot attack and destroy it. Only U.S. bunker-buster bombs could destroy the facility, which is built into the mountains.

The Supreme Leader

Iran has achieved what it wanted – mastering the knowledge and technology of enrichment. Ideally, Tehran would like to have hundreds of thousands of centrifuges. But Iran achieved its minimum goals, so it is ready to make a deal. And Rouhani is fully empowered to cut one.

The supreme leader (left), however, is not interested in restoring full diplomatic relations with the United States. He probably would not object to better relations and allowing exchanges. But Ayatollah Khamenei would not, for example, approve the opening of a new U.S. embassy.

An agreement on the nuclear issue, however, could create momentum that would have a trickle-down effect on U.S.-Iran relations. Such momentum would have its own dynamism. But for now, the default position is hostile to full diplomatic relations with the United States. Journalists, athletes, museum directors and academics may have an easier time going to and from Iran. Exchanges, however, would not likely lead to an economic or diplomatic relationship —at least anytime soon.

Obstacles to Outreach

Some factions in Iran will almost certainly push back and make it more difficult for Rouhani (left) to improve relations with the outside world. Not many people will oppose better relations with Iran’s neighbors. But there may be some disputes about prioritizing relations with other regional powers. For example, should Iran devote more resources to strengthening ties with Turkey, Saudi Arabia or Pakistan? Some will call for looking east rather than west.

Saudi Arabia is becoming a more pressing issue in Iran. The monarchy seems to be waging war against Tehran almost everywhere. Iranian relations with Syria, Lebanon, Hezbollah, and Iraq are basically oriented toward deterrence, defense and retaliation in case of attack. Tehran’s goal is not to project power. But Saudi Arabia is projecting power in Syria, Egypt, Yemen, Libya, Tunisia, Iraq, Afghanistan, Pakistan, Jordan, and Bahrain. The Saudi government is waging war on oil prices too by boosting production. And Saudi Arabia is even building infrastructure in Iran’s Baluchistan, Kurdistan, and Khuzestan provinces. Tehran’s policy, so far, has been a policy of appeasement but that is beginning to change. The 2011 Saudi attack on Bahraini protestors was insulting to Iran, as was the hanging of some Iranian citizens in Saudi Arabia.

Improving relations with the West, especially the United States, will be more controversial. Some will do their utmost to prevent it. Rouhani has a chance to improve relations with Britain, but he may encounter pushback from hardliners. So Rouhani’s government will likely take gradual steps to ease tensions.

Engaging other European countries will not be as sensitive of an issue. I’m hopeful that Iran’s image and relationship with European countries will improve within coming months, especially if steps are taken towards resolving the nuclear dispute.

Rouhani is likely to encounter stiff opposition to improved relations with the United States. Some bazaaris have vested interests in China. Basijis, voluntary militiamen, have built their credentials on being anti-American. Some members of parliament have done the same. Some socially conservative forces fear that reestablishing relations with the United States would lead to decay of traditional values. Some radicals and principlists are opposed to rapprochement on either political grounds or social reasons.

The Revolutionary Guards Corps, Iran’s most powerful military organization, may not support better relations with the United States. But some commanders or factions may not oppose moves in that direction either. After the supreme leader’s recent speech, the Guards will probably go back to their barracks to build themselves up as a military force, rather than a political force. Khamenei said they need to understand politics, but warned them to not get involved in politics.

Nasser Hadian is a professor of political science at the University of Tehran.

Iran has always been the element that tied Sunni Hamas and Shiite Hezbollah together. The Islamic Republic’s priority was to foster organizations that would be part of the “resistance” against Israel and the West. Hanin Ghaddar analyzes the split between the two organizations and Iran’s role in their relationship.

Hamas and Hezbollah have been allies since the 1980s, when they were both founded. How is their relationship today?

Hamas and Hezbollah have had a dramatic breakup after the Syrian conflict erupted in 2011. Part of the breakup is due to sectarian differences; another part is due to rival regional alliances. Hamas is a predominantly Sunni group. Hezbollah is overwhelmingly Shiite. The split has played out between their forces on the ground as well as between their political leaders. Both movements—which are political parties as well as militias—have been allied with Syria and Iran since they were both founded in the 1980s. The rupture is one of the most profound shifts in Islamist politics over the past three decades. Relations have steadily soured between the two organizations since protesters took to the streets against the regime of President Bashar Assad in March 2011. Hezbollah remained loyal to the Damascus regime, while Hamas relations with Assad eroded. Sectarian differences began to redefine their relationship in later 2011, as the Syrian conflict devolved into a confrontation between Sunni rebels and a government led by Alawites, a Shiite offshoot. In January 2012, Hamas moved its headquarters from Syria to Qatar, which is a Sunni sheikhdom. Within weeks, Hamas leader Ismail Haniyeh formally announced support for Sunni rebels. In early 2013, Hezbollah increased its presence in the conflict, dispatching troops to fight alongside Syrian forces. By mid-2013, Hezbollah and Hamas were reportedly fighting each other in the Syrian town of Qusayr, which is near the Lebanese border. Hezbollah fought side-by-side with the Syrian Army against rebels boosted by Hamas operatives. In June 2013, the two organizations tried to patch things up at a high-level meeting in Beirut. They reportedly agreed to disagree about the Syrian crisis and not allow political differences to affect their bilateral ties. But relations are almost certain to remain strained as long as they are both on the ground in Syria. For the wider Middle East, the Hamas-Hezbollah split is a dangerous microcosm of a growing trend. The Sunni-Shiite rivalry is now the main fault line on the ground and in politics, and it may impact the Syrian crisis most of all.

How has their relationship changed? What role has Iran played? Iran has always been the element that tied (Sunni) Hamas and (Shiite) Hezbollah together. The Islamic Republic’s priority was to foster organizations that would be part of “resistance” against Israel and the West. Tehran’s elite Revolutionary Guards basically created Hezbollah soon after Israel’s 1982 invasion of Lebanon. Iran has reportedly provided the organization with millions of dollars in funding and advanced weapons as a frontline resistance in Lebanon against Israel.

Tehran was not involved in the creation of Hamas, which grew out Muslim Brotherhood remnants in the Gaza Stip. Hamas formally announced its formation when the first Palestinian uprising, or Intifada, erupted against Israeli occupation in 1987. Tehran reportedly started providing Hamas financial aid and military training in the early 1990s. Thousands of Hamas militants have reportedly trained at Revolutionary Guard bases in Iran and Lebanon, while Hamas opened an office in Tehran. Iran continued support for Hamas during the Second Intifada from 2000 to 2005. It increased aid to Hamas after Yasser Arafat’s death in 2004 and Israel’s 2005 withdrawal from Gaza. It also helped bail out Hamas after it took control of Gaza in 2007. Tehran also allegedly provided Hamas military equipment used in the 2008 and 2012 conflicts with Israel. Hezbollah developed close ties to Hamas as a result of Tehran’s sponsorship. In Lebanon, Hezbollah hosted Hamas leaders for years. But in mid-2013, Hezbollah reportedly asked Hamas leaders to leave Dahiyeh, the southern suburbs of Beirut. Tehran reportedly reduced its funding for Hamas over its involvement in Syria. “For supporting the Syrian revolution, we lost very much,” Ghazi Hamad, Hamas’ deputy foreign minister, said in May 2013. But Hamas may be reconsidering its strained relationship with Hezbollah and Tehran. Hamas may feel its position has weakened since the July 3, 2013 toppling of Egyptian President Mohamed Morsi, a former Muslim Brotherhood leader. A few weeks later, Hamas official Ahmad Youssef told the press that the movement had met with Iranian and Hezbollah representatives in Beirut. “Both sides stressed that their common enemy is Israel, with the understanding that each side understands the other’s position regarding areas of difference,” Youssef said, “particularly when it comes to the situation in Syria.”

What are the similarities and differences in their agendas? How have their goals and strategies changed since the 1980s?

Hezbollah have Hamas have both undergone profound transformations since they were founded. In their early years, both were considered underground movements associated with violence and suicide bombings. But they later gained reputations for delivering social services. Hamas and Hezbollah built bases of support that allowed them to establish influential political parties. Since its inception, Hezbollah has been committed to resisting Israel. The Party of God has also been loyal to Iranian Supreme Leader Ayatollah Ali Khamenei. Its agenda has almost always aligned with Tehran’s interests. But it has accepted that Lebanon’s diverse population may necessitate a multi-sectarian state rather than an Islamic government. Hamas has had parallel goals to Hezbollah. It has been committed to the destruction of Israel and creating an Islamic state in Palestine, although some leaders have indicated in recent years that they might accept a Palestinian state based on the 1967 borders—next to a Jewish state. But the organization has retained its right to resist Israel with violence. Hamas and Hezbollah had similar goals and objectives as long as they considered Israel the main enemy. But the Syrian uprising changed everything. Hezbollah shifted its primary focus to defending the Assad regime rather than confronting Israel.

What countries influence, army and train Hamas and Hezbollah funds?

Qatar stepped in to provide Hamas with money and arms once Iran reduced for support for Hamas. Qatar’s influence over Hamas also increased after Khaled Mashaal moved to Doha in 2012. He reportedly had a close relationship with the former emir, Sheikh Hamad bin Khalifa al Thani. In October 2012, Sheikh Hamad became the first head of state to visit Gaza since Hamas took control in 2007. He pledged $400 million to build homes and rehabilitate roads. But Qatar’s relationship with Hamas has been merely political, not military. Hezbollah’s main benefactor is still Iran. But their relationship runs much deeper than any relationship Hamas has ever had with a sponsor. Hezbollah is significantly dependent on Iranian support, particularly the Revolutionary Guards. Hezbollah initially resisted getting involved in Syria because of the potential costs. But Iran’s needs have trumped Hezbollah’s interests. Secretary General Hassan Nasrallah has visited Iran twice since the Syrian uprising began. Hezbollah eventually entered Syria on the side of Assad, almost certainly under Iranian pressure.

What have Hamas and Hezbollah achieved politically?

Hezbollah entered electoral politics in 1992, winning eight parliamentary seats. It gradually gained more influence as a member of coalition governments but did not play a major role until Syria’s 2005 withdrawal from Lebanon. Hezbollah effectively inherited the Syrian role, including influence over state institutions. By 2010, it was powerful enough to force the resignation of Prime Minister Saad Hariri by pulling out of the coalition government, although the move cost it some support. Hezbollah is now entrenched in the Lebanese state. It has sufficient clout to prevent the creation of any government that would try to exclude it. Its hold extends into some branches of the Lebanese Army and intelligence services. Hamas entered politics much later than Hezbollah. In 2006, it won a stunning victory against the long-dominant Fatah Party of Yasser Arafat in parliamentary elections--and quickly had to learn how to govern. In 2007, clashes between Hamas and Fatah left Hamas in uncontested control of Gaza, which it still held six years later. The electoral victories of Islamist parties in Egypt, Tunisia and Morocco boosted Hamas’ status after the 2011 uprisings. Two years later, however, its popular support may be ebbing. Ironically, Hamas now faces challenges from other Islamists, notably ultraconservative Salafis and jihadi groups in Gaza.

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Fulton is the author of “The IRGC Command Network: Formal Structures and Informal Influence,” which details the evolution of a powerful faction within the Revolutionary Guard’s core leadership and its influence on regime decision-making.

How have the Revolutionary Guards reacted to Hassan Rouhani's victory?

Immediately after the mid-June election, the Revolutionary Guards (IRGC) issued a formal statement welcoming Rouhani’s election and pledging to work with him. “We are fully prepared to cooperate with the future administration in the framework of all our legitimate duties and missions. The grand and passionate presence of the people in the election on the one hand began a new chapter in the evolutionary movement of the Islamic Revolution and the progress of the country, and on the other hand, signaled another defeat for the enemies’ front.”

Otherwise, the Revolutionary Guards leadership has refrained from commenting on Rouhani’s victory except to distinguish him politically from the reform movement led by President Mohammad Khatami between 1997 and 2005. Mohammad Safar Harandi, a senior IRGC adviser, for example, insisted that the new president is ideologically closer to the principlists (ultraconservatives), the political group most closely aligned to the influential Command Network. The “Command Network” is one faction of extremely influential hardline IRGC commanders. This is a group with relationships dating back to the 1980-1988 war with Iraq that has since remained remarkably cohesive. Many of its members almost certainly interacted with Rouhani during the war or his 16 years as secretary of the Supreme National Security Council. On July 2, Brig. Gen. Ali Fazli, deputy commander of the paramilitary Basij and a Command Network member, attempted to legitimize the controversial 2009 reelection of President Ahmadinejad by pointing to the success of the 2013 election of Rouhani. “Those who accused the system of fraud in the [2009] election have realized with the people’s epic participation in the recent election that their claims were complete lies…. Those who made improper claims of fraud and entered the electoral process with doubt and created suspicion among the Iranian people should today come and apologize to the people and the system.”

How might Hassan Rouhani's election impact the Revolutionary Guards' influence on regime policy? And how might it be different from the Guards' influence during the Ahmadinejad years in power?

One benchmark for IRGC influence in the new government will be Rouhani’s cabinet. Ahmadinejad had an unprecedented number of former IRGC officers in his cabinet, and change or consistency in this presence could be telling. The senior leaders, however, are unlikely to be forcibly removed from their current positions as a result of Rouhani’s election. The core IRGC leadership will, therefore, remain positioned to directly influence regime decision-making, particularly on national security and core foreign policy issues. In that sense, little may change. In the domestic realm, the IRGC may tolerate attempts by the new government to reform civil society, as long as reforms do not unleash currents that jeopardize regime stability. For example, the IRGC tolerated President Mohammad Khatami’s reformist government until the July 1999 student protests prompted the Guards’ leadership to threaten direct intervention if the government did not contain the situation. This is not a perfect comparison, however, as the IRGC has become more aggressive in responding to internal threats since IRGC commander Jafari’s 2007 appointment, and especially since mass demonstrations after the 2009 election. The Command Network, the same core group that then controlled the IRGC and warned Khatami, has only strengthened its grip in the intervening years. It is now is positioned to intervene again against any perceived challenges to the regime or the Guards’ interests.

Do the Revolutionary Guards have "red lines" for Rouhani's administration? What might they be?

The Revolutionary Guards have articulated at least one red line. Three days after the election, Brig. Gen. Mohammad Esmail Kowsari repudiated the influence of reformist leaders in the 2013 election. He warned against allowing former presidents Hashemi Rafsanjani and Mohammad Khatami to have influence again. Kowsari is a former senior IRGC commander linked to the Command Network. He currently represents Tehran in parliament and is a member of the National Security and Foreign Policy Parliamentary Commission. Kowsari said Iranians “fundamentally no longer trust” the reformists. Hardliners both inside and outside the IRGC appear to be united on this issue.

Who are the most influential Revolutionary Guards commanders? What is their relationship with Rouhani?

Although very influential, the Command Network is also only one part of the IRGC leadership. Another faction of current and former IRGC commanders—including Ali Shamkhani (above with Rouhani) and Hossein Alaei— appears to be more closely aligned with Rouhani’s camp. After the 2013 election, former IRGC Navy Commander Alaei defended Rouhani as “a known figure in the Islamic Republic, and there are no issues with him. He has been, and is, a revolutionary individual and effective in the revolution,” while Shamkhani praised the role of former presidents Rafsanjani and Khatami, who both supported Rouhani prior to the election.

Will Fulton is an Iran Analyst for the Critical Threats Project at the American Enterprise Institute.

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Dr. Fatemeh Haghighatjoo was a member of Iran’s parliament between 2000 and 2004. Elected at the age of 30, she was the youngest woman member ever elected to the Majles and one of only 13 women — among 290 — in the sixth parliament. Haghighatjoo charged the Revolutionary Guards with torture and the Guardian Council with manipulating elections. The Guardian Council subsequently barred her from running for office. Haghighatjoo is now directing the Nonviolent Initiative for Democracy, a nonprofit organization based in Boston.

What does the presidential election tell us about Iran’s political climate?

The election shows that Iranians want to open up the political space and increase civil liberties. They want to see the removal of the securitized atmosphere. The state interferes in every aspect of people’s lives. People are arrested for next to nothing. Iranians want to see a more rational government take over. For the first time, foreign policy played an important role in the presidential election. Even the government did not anticipate that it would come up as a key issue during the presidential debates. Foreign policy dominated the campaign because it is connected to people’s everyday life. Iranians sent a clear message to the government that they want to see the nuclear issue resolved because they realize how it negatively impacts their daily lives. But that does not necessarily mean that Iranians do not want development of nuclear technology. President-elect Hassan Rouhani put this in nice sentences. “It is important for centrifuges to spin, but people’s lives should run too,” he said during the campaign. Rouhani sees the connection.

What does the election mean for change in domestic policy?

On security issues, Rouhani will try to reduce the influence of the security apparatus in daily life. The government looks at everything through the lens of security. Even youth playing with water guns in a park may be seen as a threat. Rouhani has said that he does not want a securitized atmosphere. He wants to relax controls on civil society and cultural affairs.

On the economy, Rouhani will reverse outgoing President Mahmoud Ahmadinejad’s populist policies. Economic growth rates have been negative for two consecutive years. Rouhani‘s team will have a hard time to reversing this trend. His goal will be creation of job opportunities and a positive growth rate. On subsidies, he will likely enact more efficient reforms. Ahmadinejad executed the reforms poorly. His government borrowed money from the central bank, which dramatically increased inflation to more than 40 percent.

On education, Rouhani may try to reverse changes made to higher education. Ahmadinejad’s government purged professors, pushing them to retire early. The social sciences and humanities also suffered. Women were barred from more than 70 majors, and women’s studies departments were shut down.

But some of these actions were probably ordered by the supreme leader. And Rouhani will not challenge Ayatollah Ali Khamenei on every issue. Women’s issues are usually secondary to other issues, unfortunately.

On cultural affairs, he is likely to lift some unnecessary restrictions on the cultural and arts community to allow more productions.

What does the election mean for the balance of power between supreme leader and presidency?

Over the past 16 years, Khamenei has consolidated his power over the legislative, judicial and executive branches and curtailed their independence. Rouhani has a good relationship with Khamenei and is trusted. He has a great ability to convince people as well, which will help the new president to extend his power. But Khamenei will not sit by while his real power shrinks. Rouhani will engage Khamenei and prioritize which issues to take bolder action on. Rouhani’s priorities will likely be foreign affairs and the nuclear issue, his specialties.

What does Rouhani’s election mean for nuclear policy and negotiations?

Rouhani’s main priority is fruitful negotiations with P5+1 (the United States, Russia, China, Britain, France and Germany). He will almost certainly not accept suspension of uranium enrichment. The national consensus is that Iran must continue to enrich uranium domestically. But Rouhani will work on building trust with the West and the United States to gradually lift sanctions. He may accept U.N. measures that ensure Iran will not militarize its nuclear program.

On the other hand, the nuclear issue has become something of a domestic political game in Iran. Rouhani will try to strengthen his approach to nuclear talks by engaging all key players including the Supreme Leader, the Revolutionary Guards and parliament while preventing radicals from trying to sabotage his approach to the talks.

What did the election say about the balance of political power?

During the campaign, Rouhani promised to form an inclusive cabinet that would bring moderates from both the reformist (centrist) camp and the principlist (conservative) camp. He understood that in order to get things done, politicians from both the left and the right need to view his election as a win-win situation.

Rouhani’s government will likely be particularly cooperative with parliament. This speaks to his background as a former deputy speaker, former chairman of the Foreign Relations Committee, and former chairman of the Defense Commission. Rouhani served in parliament for two decades between 1980 and 2000.

What does the election mean for youth, who now dominate the population?

The youth participated in the election to say no to the status quo. But they have some doubts. They recognize that amending the constitution is out of the question for now. So they have minimalized their demands in the hopes of changing smaller things. The youth mainly want to see economic improvement, social relaxation and more civil liberties. The rate of unemployment is extremely high and inflation is above 40 percent.

Rouhani’s trump card has been the youth, so he won’t forget their demands if he is thinking about re-election in 2016.

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The views, findings, and recommendations of this report are those of the authors alone and do not necessarily reflect the views of the United States Institute of Peace or the Woodrow Wilson International Center for Scholars.